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Looking to 2012: major progress in Ukrainian real estate laws

The Ukrainian real estate framework is becoming much more open, transparent, and attractive for doing business. Long-awaited ground-breaking real estate laws have finally appeared, and more are soon to follow.

New construction law

The main advancement is the Law of Ukraine on Regulation of City-Planning Activity, dated 17 February 2011 (Construction Law). Called by high-rank officials revolutionary and historic, the Construction Law is the basis of construction reform in Ukraine.

Like a building constitution, the Construction Law provides for fundamental regulation of construction. It substantially improves the rules of play for developers, investors, construction companies, banks, and other players on the construction market.

Accommodating the concerns of foreign companies doing business in Ukraine, the Construction Law is to render the construction procedures simple and transparent and to reduce construction times and costs.

Simplification of permitting

The Construction Law considerably simplifies, reduces, and centralises construction permit procedures. First, the number of construction permit/approval procedures is four times less, from 93 to 23. Second, the term for obtaining all necessary construction documents is almost seven times less, from 415 to 60 days. Third, the Construction Law introduces tacit consent and declarative principles in construction permitting. All these improvements aim to render construction projects much more predictable and efficient.

Transfer of assets along with permits

One of the principal innovations is that the Construction Law allows developers to transfer unfinished construction along with permitting documentation. The construction permit no longer ties to certain developer and general contractor, but rather to the construction project. Even though the Construction Law requires re-obtaining the construction permit in the case of substitution of a developer or general contractor, it provides that such reobtaining does not stop the construction.

Introduction of zoning

The Construction Law introduces zoning and requires local authorities to approve zonings throughout Ukraine. Each developer should be able to know what and where it can build. Although city-planning documentation is largely absent in Ukraine, the Construction Law motivates local authorities to adopt such documentation by 1 January 2012. Until they do so, the Construction Law prohibits local authorities from transferring state or municipal land into ownership or lease. Since local budgets greatly depend on land and construction related payments, the authorities should be eager to quickly adopt the city planning documentation.

Land cadastre law

Another important new act is the Law of Ukraine on State Land Cadastre, dated 7 July 2011 (Land Cadastre Law). Largely effective from 1 January 2012, the Land Cadastre Law brings a number of changes. One is a principle of transparency of land cadastre data.

The transparency principle is important because every person will be able to obtain relevant information on lands within the country. This principle will also facilitate access of individuals and legal entities to available land plots. It will create the preconditions for the development of a transparent land market in Ukraine. Openness of land data will make it more attractive to invest in Ukrainian lands.

Land data publication

The Land Cadastre Law envisages publication of the following cadastre data on the official website of the State Agency of Land Resources of Ukraine:

boundaries of administrative territorial units;

cadastre numbers of land plots;

boundaries of land plots;

purpose designation of land plots;

distribution of lands among owners and users;

limitations in use of lands;

summary data of qualitative and quantitative accounting of lands;

normative monetary value of lands; • land areas;

parts of land plots subject to servitude or sublease; • coordinates of turning points of boundaries of cadastre objects; and

soil valuation.

Elimination of corruption

The above legal advancements aim to reduce bureaucracy and corruption in the Ukrainian real estate market. Both the Construction Law and the Land Cadastre Law suppress the influence of authorities on construction procedures and land matters. For example, experts estimate that the Construction Law diminishes corruption by 90%. This should boost efficiency in the construction industry.

Abolishment of moratorium on alienation of agricultural land

A vital law Ukraine is further to adopt is one on land market. Such law is necessary not only to regulate the market, but, first and foremost, to abolish the moratorium on alienation of agricultural land. Following the Land Cadastre Law, the land market law is the final precondition to eliminate the moratorium. This may occur only from 1 January 2012. Draft law on land market is currently in the Parliament and, depending on political will, may soon reach enactment. If this happens, the chances are that the moratorium will lapse and Ukrainian agricultural land market will become open starting from 2012.

One of the principal innovations is that the Construction Law allows developers to transfer unfinished construction along with permitting documentation. The construction permit no longer ties to certain developer and general contractor, but rather to the construction project.